Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 6 stocks made the list for top value stocks in the Software industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Software Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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6 Undervalued Software Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 6 undervalued stocks in the Software industry for Friday, April 12, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Software industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Cyber Apps World Inc’s Value Grade

Value Grade:

Cyber Apps World Inc. is focused on the development of mobile applications. The Company allows users around the world to save money on products and services from member merchants and suppliers instantly with mobile coupons, using their desktops and/or mobile devices, including smartphones. The Company is developing a delivery computer application known as Friendly and Fast. The application is being designed to allow users to order food, groceries, and other courier services. Friendly and Fast's is focused on delivering goods. Friendly and Fast targets both individual and corporate customer segments.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Cyber Apps World Inc has a Value Score of 89, which is considered to be undervalued.

Now, let’s assess Cyber Apps World Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 3.1, when compared to the industry median of 24.4, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Cyber Apps World Inc’s shareholder yield is higher than its industry median ratio of (2.39%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Cyber Apps World Inc’s price-to-book ratio is higher than its industry median ratio of 3.31. This could make Cyber Apps World Inc less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at Cyber Apps World Inc’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. Cyber Apps World Inc’s price-to-free-cash-flow ratio is lower than its industry median ratio of 31.18. This could make Cyber Apps World Inc more attractive because the lower P/FCF ratio indicates that Cyber Apps World Inc is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Magic Software Enterprises Ltd’s Value Grade

Value Grade:

Magic Software Enterprises Ltd. is a provider of application development, business process integration platforms, vertical software solutions and related professional services. The Company is a vendor of information technology (IT) outsourcing services. Its software technology is used by customers to develop, deploy and integrate on premise, mobile and cloud-based business. It operates through two segments: software solutions and IT professional services. The software services segment includes software technology and complementary services. The IT professional services segment offers IT services in the areas of infrastructure design and delivery, application development, technology planning and implementation services, and communications services and solutions. Its product portfolio includes Magic xpa Application Platform, AppBuilder Application Platform and Magic xpi Integration Platform. Its vertical software packages include Leap, Hermes Solution, HR Pulse and MBS Solution.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Magic Software Enterprises Ltd has a Value Score of 75, which is considered to be undervalued.

Magic Software Enterprises Ltd’s price-earnings ratio is 15.6 compared to the industry median at 50.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Magic Software Enterprises Ltd more attractive for value investors.

Magic Software Enterprises Ltd’s price-to-book ratio is higher than its peers. This could make Magic Software Enterprises Ltd less attractive for value investors when compared to the industry median at 3.31.

You can read more about Magic Software Enterprises Ltd’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Hello Group Inc (ADR)’s Value Grade

Value Grade:

Hello Group Inc, formerly Momo Inc, is a China-based online social and entertainment company. The Company operates in three segments. Momo segment and Tantan segment mainly provide live video service, value-added services including membership subscription and virtual gift service, and mobile marketing services including advertising and marketing solutions. QOOL segment provides music service revenues, film distribution service and film promotion service. The Company also operates other applications to serve different social and entertainment demands from its users.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Hello Group Inc (ADR) has a Value Score of 97, which is considered to be undervalued.

Hello Group Inc (ADR)’s price-earnings ratio is 4.1 compared to the industry median at 50.2. This means that it has a lower price relative to its earnings compared to its peers. This makes Hello Group Inc (ADR) more attractive for value investors.

Hello Group Inc (ADR)’s price-to-book ratio is higher than its peers. This could make Hello Group Inc (ADR) less attractive for value investors when compared to the industry median at 3.31.

You can read more about Hello Group Inc (ADR)’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Supercom Ltd’s Value Grade

Value Grade:

Supercom Ltd is an Israel-based global provider of traditional and digital identity solutions, advanced Internet of Things (IoT) and connectivity solutions, and cyber security products and solutions, to governments and private and public organizations throughout the world. The Company is comprised of three main Strategic Business Units (SBU): e-Gov, IoT and Connectivity (IoT), and Cyber Security: e-Gov, e-Government platforms and innovative solutions for traditional and biometrics enrollment, personalization, issuance and border control services; IoT and Connectivity - products and solutions that identify, track and monitor people or objects in real time, enabling its customers to detect unauthorized movement of people, vehicles and other monitored objects and Cyber Security delivered through subsidiaries such as, Safend Ltd and Prevision Ltd.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Supercom Ltd has a Value Score of 73, which is considered to be undervalued.

Supercom Ltd’s price-to-book ratio is higher than its peers. This could make Supercom Ltd less attractive for value investors when compared to the industry median at 3.31.

You can read more about Supercom Ltd’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Treasure Global Inc’s Value Grade

Value Grade:

Treasure Global Inc. is a holding company, which is engaged in developing technology platforms. The Company has created an online-to-offline (O2O) e-commerce platform business model offering consumers and merchants instant rebates and affiliate cashback programs, while providing an e-payment solution with rebates in both e-commerce and physical retailers/merchant settings. It operates through its subsidiaries, namely ZCity Sdn. Bhd. (ZCITY); AY Food Ventures Sdn Bhd; Morgan Global Sdn. Bhd, and Foodlink Global Sdn Bhd. ZCity Sdn. Bhd. owns all intellectual property rights to copyrightable, patentable, and other protectable intangible assets relating to its business, including trademarks. Its proprietary product is an Internet application (or App) branded ZCITY App, which is developed through its wholly owned subsidiary, ZCITY. The ZCITY App targets consumers through the provision of personalized deals based on consumers purchase history, location, and preferences.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Treasure Global Inc has a Value Score of 68, which is considered to be undervalued.

Treasure Global Inc’s price-to-book ratio is higher than its peers. This could make Treasure Global Inc less attractive for value investors when compared to the industry median at 3.31.

You can read more about Treasure Global Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Uphealth Inc’s Value Grade

Value Grade:

UpHealth, Inc. is a healthcare technology and technology-enabled service company. The Company operates through three segments: Integrated Care Management, Virtual Care Infrastructure, and Services. The Integrated Care Management segment provides guidance and tools to enhance population health through its SyntraNet platform. This platform improves overall health system performance by leveraging capabilities in data and analytics, health information exchanges, pharmacy care services, health care operations, and population health. The Virtual Care Management leverages digital health tools, technology, data, and analytics to provide telehealth solutions, which use electronic information and telecommunications technologies to support and promote long-distance clinical health care, patient and professional health-related education, and virtual care infrastructure solutions. The Services platform provides behavioral health, mental health, and pharmacy services in the United States.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Uphealth Inc has a Value Score of 71, which is considered to be undervalued.

Uphealth Inc’s price-to-book ratio is higher than its peers. This could make Uphealth Inc less attractive for value investors when compared to the industry median at 3.31.

You can read more about Uphealth Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Software Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Software stocks as well as other industrys.

Choosing Which of the 6 Best Software Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Cyber Apps World Inc stock has a Value Grade of A.
• Magic Software Enterprises Ltd stock has a Value Grade of B.
• Hello Group Inc (ADR) stock has a Value Grade of A.
• Supercom Ltd stock has a Value Grade of B.
• Treasure Global Inc stock has a Value Grade of B.
• Uphealth Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 6 undervalued stocks in the Software industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Software Stocks

Want to learn more about Software stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 6 Undervalued Software Stocks for Friday, April 12
• 4 Undervalued Software Stocks for Thursday, April 11
• Why Atlassian Corp’s (TEAM) Stock Is Up 4.84%
• Why Blackbaud Inc’s (BLKB) Stock Is Up 4.24%

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.